What is an Asset?
An asset is an item, thing or entity that has potential or actual value to an organization.
What is Asset Management?
Asset management is the coordinated activity of an organization to realize value its assets. We can also refer it as the art and science of making the right decisions and optimizing the delivery of value. A common objective is to minimize the whole life cost of assets considering other critical factors such as risk or business continuity.
Key Areas of Asset Management
- Balancing of costs
- Balancing of opportunities and risks against the desired performance of assets
- Achieving organizational objectives
Importance of Asset Management
Asset management is important because it can help organizations to: –
- Reduce the total costs of operating their assets
- Reduce the capital costs of investing in the asset base
- Improve the operating performance of their assets (reduce failure rates, increase availability e.t.c)
- Reduce the potential health impacts of operating the assets
- Reduce the safety risks of operating the assets
- Minimize the environmental impact of operating the assets
- Maintain and improve the reputation of the organization
- Improve the regulatory performance of the organization
- Reduce legal risks associated with operating assets
LINE OF SIGHT as a Key Element of Asset Management
- An approach within an organization that looks to line up the work that is done directly on assets with the objectives of that organization
- A discipline which recognizes, accommodates and aligns the risk of owning a particular asset with the goals of the organization that operates the asset
The Seven Principles of Asset Management
- Holistic: Looking at the combined implications of managing all aspects, the functional contributions of assets within asset systems and the different asset life cycle phases and corresponding activities, rather than a classified approach
- Systematic: An orderly approach, promoting consistent, repeatable and auditable decisions and actions
- Systemic: Considering the assets in their asset system context and optimizing the asset systems value (including sustainable performance, cost and risks) rather than optimizing individual assets in isolation
- Risk-Based: Focusing resources and expenditure, and setting priorities, appropriate to the identified risks and the associated cost/benefits
- Optimal: Establishing the best value compromise between competing factors, such as performance, cost and risk, associated with the assets over their life cycles
- Sustainable: Considering the long-term consequences of short-term activities to ensure that adequate provision is made for future requirements and obligations such as economic or environmental sustainability, system performance, societal responsibility and other long-term objectives
- Integrated: Recognizing that combined effects are vital to success. This requires a combination of the above attributes, coordinated to deliver a joined-up approach and net value
Decision making in Asset Management
- Good decision making is also vital in joined-up asset management. This requires adequate information about the assets and their associated strengths, weaknesses, opportunities and threats. In particular, it is important to understand the relationship between asset management activities and their actual or potential effect upon short-term and long-term costs, risks, performance and asset life cycles (or asset system sustainability).
- It is only after understanding the factor above that an informed decisions can be made about the optimal mix of life cycle activities (such as design/selection, acquisition/construction, utilization, maintenance, renewal, modification/enhancement, decommissioning or disposal).
- In many organizations, there will be more potential tasks to carry out than resources, time or budgets will permit. The continuous optimizing and prioritizing of tasks and plans are a way of life for such organizations.
About the Author
Thank you for reading this article. The author, James Ndambiri is an avid Business Advisor and Consultant: A Tax Surgeon, Proficient Accountant, Skilled Auditor, a Guru in Financial and Investment management, Expert in Business Strategy Formulation, Business Transformation Wizard, Family Business Advisor, Lecturer, Business Coach and a Family Man.
James is the Founder, Team Leader, CEO & Managing Partner of MNC Consulting Group. MNC Consulting Group is your most trusted and respected professional business consulting firm recognized by our clients for delivering excellent business advisory and consulting services that create value to their ventures. With our focus set on value addition, we offer our clients the highest quality professional services in Accounting, Audit and assurance, Tax, Business Transformation, Investments and Financial Advisory, Family Business Advisory, Company Secretarial Services and Property Management that addresses their business needs through attracting, recruiting and retaining knowledgeable and passionate professionals who enable us to deliver superior results while contributing positively to the community in which we live and work.
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